A stagnant economy has negatively affected occupancy rates at SA’s hotels.

Hospitality Property Fund (HPF), a subsidiary of gaming and leisure group Tsogo Sun, says SA’s hotels are struggling to fill their rooms amid a stagnant economy.

Room occupancy at the fund’s 53 hotels and resorts declined 2.6% to 60.6% while the market experienced a 2.0% to 60.0% decline, according to the STR Global South African Hotel Review, HPF said following the release of results.

The company declared a combined dividend of 41.22c in the six months to September , 0.61% lower than the 41.83c declared in the comparable 2017 period.

The company said hotel trading is expected to remain under pressure until the outlook for the SA economy improves.

“Ongoing capital expenditure requirements will be funded partially from a dividend retention and partially from debt facilities,” it said.

Rental income for the six months increased 10% to R345m compared with R314m in 2017, mainly due to the inclusion of 29 hotel properties for the first time in the group’s financial results.

The company said its rental income is subject to seasonal variability and has been further affected by poor trading in the Western Cape.

HPF said the general sentiment towards the economy caused increased pricing competitiveness across all the market segments. This reflected in the average room rate for the portfolio falling 0.9% on the prior period, mainly due to the poor performance from its Western Cape hotels.

Revenue per available room decreased 3.5%. The STR figures showed a growth in average room rate of 0.9% and a decline in revenue per available room of 1.2% for the SA market over the same period.

Hospitality’s expenses for the six months rose 5%, or R1.4m, to R28m compared with the previous six months.

Net finance costs of R80m were incurred compared with R83m in the 2017 period.

HPF appointed Robert Nicolella as CEO following the resignation of Keith Randall as an executive director and CEO, effective November 1. Randall stepped into the role of chief operating officer.

Hospitality’s management was not available for comment.

Ian Anderson, chief investment officer at Bridge Fund Managers, said that since Tsogo Sun took over HPF in 2016 he has disinvested from the group, which has been difficult to understand, especially regarding how it calculates its income.

“They don’t operate like typical property companies should. Their lease structuring is concerning. It is not only linked to rentals but also to the performance of the hotels,” he said.

Source: Business Day Live – alistair Anderson